Cap and Trade Under Attack -- Say It Ain't So, Mr. Nader

Bill Chameides, recently appointed to America's Climate Choices, blogs regularly at theGreenGrok.com.

Last week featured strange bedfellows and strange enemies: Ralph Nader teaming up with the Wall Street Journal, on the one hand, environmental activists storming a green group's offices on another.

You'd think the environmental community would be uncorking the bubbly early this year. After eight long years in the legislative desert, we have a president and Congress committed to passing climate legislation. But any celebration is premature.

The Cap and Trade Wars

Anyone who thought passing climate legislation would be easy was disabused of that notion last spring when the Lieberman-Warner Climate Security Act went down in flames without even a vote. It seems that once things got serious, the solid coalition for climate action splintered into so many pieces of special interests and ideologies.

Now, as we get closer to Inauguration Day and the beginning of what many think could be America's new green era, the divisions in the environmental community are mounting. Front and center is debate over the market-based, cap and trade system proposed to bring greenhouse gas emissions down while, at least in theory, allowing markets to minimize costs. At the time of Lieberman-Warner, everyone seemed to be on board with cap and trade, but there was always a segment of environmentalists that distrusted markets and favored a carbon tax instead. That segment is getting  louder.

For the record, on balance I favor a cap and trade. The reason is straightforward: a cap is the only way to ensure that emissions will actually go down. A carbon tax can only encourage emissions reductions, not ensure them. However, I also see some attractive features to a carbon tax - it's probably simpler to administer, and, in light of Wall Street's recent meltdown, I am a little wary of entrusting our climate future to markets. So while my balance sheet puts cap and trade at the top, I think reasonable people can disagree.

But can we disagree in a reasonable way? Memo to Rising Tide: occupying the offices of an environmental advocacy group with signs and name-calling is probably not the way to build the strong coalition needed to get climate legislation passed in the face of entrenched opposition.

And, Mr. Nader, it's fine to argue in favor of a carbon tax, but the arguments have to make sense.

Nader's 'Global' Carbon Tax

Ralph Nader does not like cap and trade. In a recent opinion piece, he argues that it will not cut global emissions if it is not adopted by all countries ("We Need a Global Carbon Tax," Wall Street Journal, December 3, 2008, A17 ). He is, of course, correct. This global problem needs global participation. It won't work without China -- or without the U.S.

Now comes the sleight of hand - Nader argues that since China will never agree to an emissions cap (not necessarily the case), we should just impose a "global" carbon tax. That  way, he reasons, every country's emissions will go down. Voila, problem solved.

But wait a minute. If China won't agree to a cap, why would it agree to impose such a tax? And if it didn't, how are we any better off than a cap and trade without China? Getting the global community to participate in a climate solution is a serious challenge, but not one that is solved by ditching cap and trade for taxes.

And isn't the notion of a "global" carbon tax a little far fetched. I can see the United States imposing a carbon tax on its own businesses, but how do you devise a global carbon tax? It certainly would not be an international tax. Can you see Americans agreeing to pay taxes to an international body?

Nader proposes that the taxes would be administered nationally and collected by the each nation's government. I assume, then, that the amount of tax per ton of carbon would be set by international agreement - much in the way caps are set in a cap and trade. But every nation has its own currency, whose value constantly changes. What standard would be used to set the tax? Would it be the dollar? A barrel of oil?  The Yuan? Would the tax rate in any given country have to be adjusted every time its currency went up or down in value relative to the standard? Can you imagine what would happen if a tax rate here changed every time the dollar's value moved? Wouldn't governments have the ability to game the system by manipulating the value of their currencies?

Carbon taxes maybe. But a global carbon tax? I think not.

Deck Chairs on the Titanic

A friend of mine wrote to me recently that "the tide is turning in favor of a carbon tax." Maybe so, but one thing is for sure: the environmental community is going to have to get its act together, if climate legislation is to be enacted

The protest group that occupied the offices of Environmental Defense Fund moved the chairs around to symbolize the folly of cap and trade - "like moving the deck chairs around on the Titanic." If climate legislation doesn't get passed because the environmental community could not reach common ground, we may look upon this entire debate as moving the deck chairs around on the Titanic.

Dr. Bill Chameides is a member of the National Academy of Sciences and the dean of Duke University's Nicholas School of the Environment. His blog is The Green Grok.

Follow Bill Chameides on Twitter: www.twitter.com/theGreenGrok

Comments

[TobyHeaps]

Hi Bill

I appreciate your sober tone and questions. For more detailed answers, see:
http://www.option13.org/Option13.pdf

1. A cap is the only way to ensure that emissions will actually go down? What if a carbon tax, as proposed in the WSJ piece, is set annually under the rubric of one global cap that is set according to a desired path of atmospheric concentrations of GHGs which is what we are really after?

2. If China won't agree to a cap, why would it agree to impose such a tax? There are three reasons outlined in the WSJ piece, including a tax is not a straighjacket on economic growth so it is much easier, psychologically, to swallow and, anyway, through the power of the price signal, it would produce the same desired result as a hard cap.

3. Regarding the political feasibility of a global carbon tax. How politically feasible will it be for the US to place a cap on carbon while fast-growing polluting countries like China do not?

Ironically, one of the biggest challenges to coming up with global mechanism to combat dangerous climate change are some members of the environmental community who have invested years of their lives in working out the kinks of the cap and trade system and are now reluctant to move on.

When Al Gore, Nader, and The Economist all support a carbon tax it might be worth considering your devotion to a cap and trade system.

[Bill Chameides - Huffpost Blogger]

TobyHeaps: Not sure I would characterize my position as "devotion." I think my statements indicated a good deal of flexibility. And by the way, Al Gore has expressed support for a tax and a cap. I would ask, who is reluctant to move on -- the taxers or the cappers? Time is short; let's drop ideology and rancor and get this done.

[Charlie Peters]

Should a grand jury consider the cause of death of Alexander Farrell, 46, expert on alternative fuels?

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/18/BAOK1087DP.DTL

[Charlie Peters]

Should California consider a fee on corn fuel ethanol use?

* * Lower price for food, gas, water, beer, cleaner air and funds for the budget from oil profit.

[setenergy]

Good call, Bill-

While distrust of the business community is logical after Enron, the current financial mess, etc. - a cap and trade system can get profit maximizers focused on emissions minimization as a means of reducing costs. While I am not against a carbon tax, I am against infighting within the environmental community. Let's have a constructive debate as we figure out the best route for the US and the world in the years ahead.

I'm excited that US emissions are falling in 2008 as we are consuming more than 5% less oil, thus making carbon emissions poised to fall 2.5% this year. See details at:
http://setenergy.org/2008/11/13/a-banner-year-for-us-climate-research-sees-sharp-emissions-drop/

Even China emissions are falling this quarter as electricity consumption falls a record in November. See details at: http://setenergy.org/2008/12/05/china-power-generation-falls-record-amount-climate-hope-alive/

The real challenge will be how we continue emissions reduction once the economy picks up again.

Onwards to sustainability,
Dennis

[Bill Chameides - Huffpost Blogger]

Setenergy - Thanx for the information. Recent trend is interesting. I agree that the challenge will be to keep a downward trend with a growing economy. And for the record, I am all for a growing economy.